Revenue Neutrality

Revenue Neutrality Laser Talk

Question:  Why is revenue neutrality important for a carbon fee?

Answer:  Revenue neutrality simply means that the money collected from polluters is routed back into the private economy instead of being spent directly by the government. In the Energy Innovation and Carbon Dividend Act, [1] the ‘private economy’ starts with American households, because the spending decisions they make will send the clearest signal to the business and investment world about the need to decarbonize. It also ensures that the cost of cutting emissions does not fall on the backs of the poor.

Some may ask, Why not embrace a ‘revenue positive’ principle where government targets the money toward clean energy, efficiency upgrades, and green jobs?

Our main reason is because the decarbonization of our economy needs the cumulative brain power of ‘the crowd’ – scientists, engineers, farmers, builders, store owners, and everyone else – not just a few government officials trying to make optimal decisions while under pressure from politicians who often control their funding.

Because nearly 70 percent of our economy is consumer spending [2], putting carbon cash back into the hands of all Americans will stimulate climate-friendly decision-making all the way from the corner store up to the executive boardroom.

Many of the investments required to scale up a myriad of potential solutions will be very large and often risky. We don’t want to see all of those risks borne by government, but rather spread out between government and private investors. Investment firms, banks, and entrepreneurs, seeing a predictable price signal and supportive government policy, will implement due diligence when evaluating which breakthroughs are likely to be successful and reduce emissions most quickly and efficiently.

In a Nutshell: Revenue neutrality means recycling carbon fee dollars back into the private consumer economy. Because nearly 70 percent of our economy is consumer spending, putting the cash collected from polluter into the hands of American taxpayers will stimulate efficient climate-friendly decision-making all the way from the corner store to the executive boardroom.

Related: Energy Innovation and Carbon Dividend Act, Economic Impacts of Pricing Carbon, Dividend Delivery.

  1. “H.R.2307 – Energy Innovation and Carbon Dividend Act of 2021.” Library of Congress (01 Apr 2021).
  2. “Shares of gross domestic product: Personal consumption expenditures,” FRED Economic Data, Federal Reserve Bank of St. Louis (27 Apr 2018).

This page was last updated on 05/05/21 at 22:15 CDT.